A project portfolio is a collection of projects that, in the aggregate determine an organization's strategy in some area, such as the organization's investment strategy. Project portfolio management is a collection of techniques, tools and methodologies that are used to allow the collective analysis of such a collection of projects. While the analysis of the performance of a single project can reveal useful information, the broader study of the portfolio it belongs to can deliver important additional data.
As is well-known, project portfolios have two main attributes, namely alignment and balance. Alignment is the accuracy with which investments in projects reflects a company's strategic goals and is achieved, for example, by aligning the goals of an organization with the projects in which the organization invests. Balance, on the other hand, refers to how projects are managed when multiple desired benefits from one or more projects cannot be obtained simultaneously (e.g., which may occur when projects conflict with each other). For example, striving for balance in a portfolio is an attempt to minimize conflict in identified parameters, such as risk vs. reward, time to market vs. quality of product, etc., that define a project. Any pair of such parameters that are considered trade-offs are typically suitable for a balancing attempt.
The advantages of analyzing a portfolio of projects, rather than individual projects alone, are well known. However, translating the theoretical benefits of alignment of those projects into an actual process for achieving these goals has been difficult to achieve.